Lawmakers plan to fill Medicaid funding hole

Department of Health and Human Services officials told lawmakers last month that the agency couldn't make the $356 million in cuts required in the state budget because lawmakers overestimated some cuts that have to be approved by the federal government.

That process takes months, officials said, but budget writers calculated the savings as if they had started immediately. Other requested cuts would break Medicaid program rules, which could cost the state millions in federal revenue, officials said.

"I don't have the money within HHS to be able to make up that hole this year," Health and Human Services Secretary Lanier Cansler told a legislative oversight committee on Tuesday.

About 1.5 million state North Carolina residents – mostly poor children, older adults and the disabled – receive Medicaid coverage.

Unless lawmakers find more money for Medicaid, Cansler said, he would be forced to eliminate many adult services, like hospice care and mental health care, which aren't required by federal law. The state also could reduce reimbursements to physicians who treat Medicaid patients by up to 20 percent, he said.

Legislative leaders told him not to make those cuts.

"We are not going to cut services, and we are not going to cut rates to make up for one-time liabilities," said state Rep. Nelson Dollar, R-Wake.

Tracy Colvard, who represents home-care and hospice workers, said he was relieved to hear those programs wouldn't be cut.

"You talk about somebody at the end of life, needing that care, and all of the sudden they can't get it paid for by Medicaid – it's a scary thought," Colvard said.

Still, the details of the state's plan to fund Medicaid are fuzzy.

Dollar couldn't say how much money the state would supply. Lawmakers have reserves of about $450 million, but a lot of that money will be needed for Hurricane Irene relief and other budget areas also have shortfalls.

Cansler said he worries about even bigger problems as Congress trims its budget.

Many North Carolina health programs rely on federal grants. The state's food stamp funding, for example, was cut by $27 million in September, and huge cuts to more grants could be on the horizon.

"We're nervous, and we're watching closely what they're going to do," Cansler said. "Everything we normally get is budgeted. So, even though we're working with the Medicaid budget (and) we're working with the other pieces of the budget, if you start losing those federal grants that we anticipated, then we've got to continue finding a way to pare things back."